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Imaging Firm Sets Sights on Growth

March 2001
By Michael A. Robinson

Aggressive marketing strategy focuses on distinct markets.

It is easy to understand why Gene Colabatistto might be tempted to get by on image. After all, ever since his company launched its first sensor-laden satellite in 1986, the international Spot system has captured and delivered millions of images of Earth—from the sands of the Sahara to the expanse of the Golden Gate Bridge.

Not that the image business isn’t a good one. Actually, Colabatistto’s company, Spot Image Corporation, the U.S. subsidiary of the France-based, European-controlled holding company, generated about $10 million in revenue last year. But this former U.S. Marine and licensed private pilot turned company president has his sights set much higher.

Indeed, Colabatistto wants to grow Spot Image to nearly $50 million in revenues in just five years. This may sound aggressive, but Colabatistto has some tricks up his sleeve.

“We’re not going to be a $50 million company in the next five years through organic growth,” Colabatistto explains. “I think we can sustain an internal growth rate of between 15 and 20 percent [annually]. A lot of our growth will have to come from expansion—joint ventures, mergers, acquisitions, alliances.”

This flexible approach means Spot Image, headquartered in Reston, Virginia, could receive funding through a partial sale to another company, which would in turn help fund growth by providing extra capital to cover new terrain. In fact, about the only thing Colabatistto will rule out is an outright sale of the entire U.S. operation to another firm.

“Our parent company does not want to divest of an American operation,” Colabatistto explains. “They [company officials] see how lucrative this market is. They want to have a company called Spot Image in the U.S. That has been very clearly communicated to me.”

Though he says he has not engaged any investment bankers and will not name any potential merger or acquisition targets, Colabatistto notes that he has done a bit of shopping already, adding that at least one announcement could come within the year.

Managing growth in a turbulent technology market is never easy, but Colabatistto has a new challenge. Space Imaging of Thornton, Colorado (see page 16), offers satellite photos with 1-meter resolution, compared with Spot’s 10-meter images. Ironically, Spot broke new ground in 1986 with 10-meter resolution for commercial applications and nonclassified government use, a standard of excellence that remained in effect for more than a decade.

The 1-meter offerings by Space Imaging allow the viewer to count the number of cars in a parking lot and to distinguish, for instance, automobiles from trucks. At 10 meters, the viewer can determine that a particular building has a parking lot with vehicles on it. When Spot 5 launches in 2002, the company will begin offering 2.5-meter resolution, still substantially behind Space Imaging’s close-ups.

But customers say Spot offers other attributes that taken together make a formidable package. These include lower acquisition costs, cheaper licensing, larger frame size and greater geographic coverage. The government of California, for example, recently paid a base price of $35,000 for a 10-meter resolution map of the entire state. Breadth of coverage and lower costs were two key selling points, state officials say. Under the licensing agreement with Spot, any state, county or local agency and any state school or university can use the map.

According to state officials, a map of California with 1-meter resolution would have cost as much as $10 million when all of the charges were tallied. Perhaps more importantly, state officials found it much easier and far more cost effective to work with Spot because the company offers wider access to sharing data among agencies and obtaining images from archived photos without running a big tab on licensing fees.

“The user will have to trade resolution for other attributes,” Colabatistto acknowledges. “One-meter resolution is a tremendous technical offering. That is a market niche we can’t touch.”

When Spot 5 launches next year, the company will offer customers a wide array of choices in image size and breadth of coverage because the satellite will contain eight cameras offering images at 2.5, 5, 10 and 20 meters and 1 kilometer. In addition, the Spot system will offer elevation models created from stereoscopic images that can provide three-dimensional models for flight simulation so that, for instance, pilots get a very real sense of what it is like to skirt over San Francisco Bay at night in a strong head wind.

Meantime, regardless of whether he acquires other companies, one of Colabatistto’s goals is to grow the U.S. business by gaining access to what are termed vertical markets. For instance, he wants to develop a relationship with a major agricultural products company that can open many doors in that broad segment of the U.S. economy. Spot would not actually sell directly to farmers or other end users but would provide its services to a large and diversified company whose clients might not even know the information used to improve their agricultural yields and quality of operations came from Spot.

The same idea holds for the enormous U.S. real estate market because so many companies need information about buildings and parcels of land. To get coverage quickly without the time and expense of building a national sales force in multiple industries means relying on vendors who have a strong customer base and large marketing muscle.

Previously, Spot Image was pretty much a plain vanilla operation: Equip satellites with good commercial-grade sensors and sell the images to the military, aerospace and commercial customers, Colabatistto explains. For most of the first 10 years of operation, that plan worked well because clients simply needed good satellite and reconnaissance photos they could analyze themselves, he adds.

But with the explosion of technology applications and services brought on by more sophisticated desktop computers and software, customers want information delivered to them in a more meaningful way, and they are willing to pay for it.

As a result, Colabatistto plans to guide his company to a new vector—the intersection of geospatial information systems (GIS), with its emphasis on data, and information technology, an area far more concerned with delivering useful information and robust applications. A confluence of this nature greatly expands the potential market from an estimated total market size of $1.3 billion this year to a projected $2 billion by 2005, he offers.

“Our intent is not to build satellites and groundstations but to focus on having access to data that we can leverage to support a commercial set of product lines. We’re moving up the value chain, getting closer to the customers.

“We want to be a full service provider of business-to-business relationships,” Colabatistto says. “Look at how our data can be used—agriculture, telecommunications, natural resource management, oil and energy exploration, water management and environmental monitoring.”

So, Colabatistto is looking for the sweet spot. He just needs a small percentage of the total U.S. market to have a very lucrative business because the company wants to focus on government mapping, agriculture, telecommunications, natural resources and the desktop GIS market. Those sectors will account for roughly 45 percent of the total market, or about $880 million. Spot Image in turn can address about $550 million of that market. So, if Colabatistto captures just 10 percent of his total market potential, he is ahead of the curve.

Since joining Spot Image as president in September 1999, Colabatistto has focused on filling out the franchise. Colabatistto’s background includes 10 years in sales and marketing of GIS workstations and products, space systems and information technology products and services, and 15 years of business operations, engineering and technology application.

Prior to joining Spot, he was vice president and manager of the information systems group at Veridian/Pacific Sierra Research Corporation. While at Veridian, he developed enhanced remote sensing products for land resource management, disaster relief and scientific research; developed and marketed a line of ruggedized, high-powered GIS workstations for global military use; and provided GIS products for in-flight use in fighter aircraft cockpits.

While at Pacific Sierra Research, Colabatistto was recognized for intelligence successes by the director of the Central Intelligence Agency. His organization received a meritorious unit citation from the intelligence community and more than 30 other awards for his group’s work.

He says his broad background in space imaging gives him a unique perspective into what customers want in terms of the quality of data and, just as crucial, the level of services and support they expect. Joining Spot Image gave him a chance to round out his career as well.

“This company really represented the commercial part of the business that I had not had much contact with,” Colabatistto says. “I saw a chance to make an impact. I thought I could get a company like this further up the value chain because I understand the end users, what they value and what they are willing to pay for. I think I have served Spot Image as an agent of change. We’ve reorganized ourselves and our approach to the market, and we are seeing the results.”